Money20/20 Keynote: Lawsky Floats ‘Transitional’ BitLicense for Startups (Nov. 3, 2014)
Weeks after delivering a speech meant to allay fears among virtual currency* businesses about impending regulation, New York State Superintendent of Financial Services Benjamin M. Lawsky struck a similar tone during his keynote address on Sunday evening at Money20/20 in Las Vegas. During his remarks to a packed ballroom at the Aria Resort & Casino, Lawsky also raised the possibility of a new addition in the proposed rules; licensing specially designed for virtual currency startups.
As he did in his Oct. 14 speech at New York’s Benjamin N. Cardozo School of Law, Lawsky sought to assuage concerns that had arisen during the comment period on the New York Department of Financial Services (NYDFS)’s proposed regulatory framework for virtual currency. Central to the agency’s proposal is a requirement that certain parties involved with virtual currencies must obtain a license. The so-called “BitLicense” has sparked concerns among the virtual currency ecosystem. Lawsky reiterated at Money20/20 that many of those concerns were unfounded and based on incorrect assumptions. For instance, the proposed BitLicense would only be required of firms that act as financial intermediaries to virtual currency transactions, and not—as some have feared—for software developers or individual virtual currency users. Bitcoin mining also won’t require a license.
In addition to clarifying the proposed rules, Lawsky said the NYDFS is weighing the possibility of establishing a “transitional license” designed for startups. “One issue we’ve heard consistently during the comment period was concern about compliance costs, especially from new or fledgling virtual currency enterprises,” he noted. “There has to be a way for startups to start up, and to play by the rules without getting crushed by huge compliance costs.”
To that end, NYDFS is considering creating the special license, which would allow certain small businesses and startups to “operate within a more flexible framework for a set period of time.”
While such firms would still have to meet strong standards for consumer protection and AML compliance, Lawsky explained, they potentially could be granted certain allowances, such as using an outside vendor rather than an internal compliance officer for certain functions, thereby reducing costs. He also raised the possibility of NYDFS designating a specialized group of examiners to handle licensing and applications for startup firms, giving those examiners insight and experience as to the unique concerns, challenges and needs of virtual currency startups.
Lawsky said the latest revision to the proposed BitLicense regulation would be released soon, to be followed by another comment period, with a finalized version out by early next year.
*Virtual currency is the terminology used in the proposed regulation and is, therefore, used throughout the article. The Bitcoin Foundation prefers the term digital currency because it says virtual should be reserved for currencies that inhabit closed commercial and game-playing systems.
See related stories:
- Change Is Coming to NYDFS Proposed Virtual Currency Regs
- Wheels in Motion for Digital Currency Regulation in N.Y.
- N.Y. Regulators Seek Digital Currency Laws that Preserve Innovation; Money2020 Announces Bitcoin Focus in 2014
*Virtual currency is the terminology used in the proposed regulation and is, therefore, used throughout the article. The Bitcoin Foundation prefers the term digital currency because it says virtual should be reserved for currencies that inhabit closed commercial and game-playing systems .
